Tax time comes around with surprising regularity, and when it seems you’ve only just got over the stress of filing in time for the deadline, that time of the year comes around again and our taxes loom over us like a rain cloud.
With the tax reform now in full swing, it’s more important than ever to get your taxes right, and to try to understand the changes to the law as best as possible. Here are a few more of your 2019 tax queries answered:
- Alimony…deductible, or not?
For divorce agreements finalized on or before the 31st, December 2018, spouses paying alimony can still deduct the payments on their returns, while the recipient must include the income on theirs. However, for divorces completed in 2019 and later, payments of alimony can no longer be deducted, and recipients will not have to include them on their returns.
- What has changed with meal and entertainment expenses?
Entertainment or amusement expenses can no longer be deducted, but you are still permitted to make a 50% deduction for meal and travel expenses, provided you can prove that you were dining with clients or traveling for a specific business-related purpose. Meals cannot be considered extravagant, and if you throw an office party or provide food at a meeting, you can still deduct 100% of the cost. Most importantly, bills must be itemized and give direct proof of the amount paid.
- How do I know if I qualify for pass-through status and its 20% deduction?
Some business owners who are set up as ‘pass-through’ companies, under the new tax law are permitted to deduct 20% of their qualified business income, and here is where seeking help from a qualified tax professional makes business sense. Some owners of businesses do not realize that they are already classed as pass-through’s, since income is passing through the business to their personal tax returns.
- Is it wise to think again about gifts given to family when I have a taxable estate?
This tax affects the wealthiest individuals, and the total amount that can be passed on to legitimate heirs without any consequences from federal taxes, has almost doubled, to a whopping $11.4 million per person. However, fast forward a few years and in 2026, unless Congress takes some action, the amount will go back to $5 million, with state estate taxes confusing maters even more.
This article only goes part way to explaining the myriad changes to tax laws that have recently occurred, and if you’re concerned about your tax bill and how best to prepare and plan your taxes for the future, you should seek help from a qualified and experienced tax professional.